Lifestyle Creep: What it is and how to avoid it
Lifestyle creep happens when you increase your spending as your income grows. Over time, nonessential luxury spending becomes the norm before you realize where your money has gone. These expenses “creep” up on you as you adjust to a higher standard of living. Lifestyle creep is an easy trap to fall into and can delay you reaching your financial goals.
What lifestyle creep looks like
For example, say you get a raise. You decide to upgrade to a fancy new car with all the luxury features. But now you’re paying more for a car that does the same thing your previous, less expensive one did. Or you splurge on a new designer wardrobe, while your savings account has barely grown at all.
But lifestyle creep isn’t just about big purchases. It can happen when to start buying expensive coffee or getting takeout lunch every day at work. These costs can really add up over time.
It is okay to celebrate when you get a raise and to treat yourself occasionally. Just don’t let those treats become your new normal. You worked hard for that money and shouldn’t let it go to waste.
Preventing lifestyle creep
Now that you know what lifestyle creep looks like, let’s talk about some ways you can prevent it from happening to you:
Build a budget. Maintaining a budget is a crucial part of your financial wellbeing. Being able to successfully track your spending and see your buying patterns will help you notice changes in your habits over time. You may find it easier to stick to your budget when you have a clear picture of your goals and milestones in mind, which brings us to tip #2.
Write down your goals. Studies show that writing things down helps us remember and visualize them better. Keep your list of goals someplace where you will see it often to remind yourself of what you’re working toward.
Pay yourself first. Start putting some of your earnings towards your savings goals before it hits your regular spending budget. When money goes directly into your savings, you are less likely to spend. It also gets you into the habit of saving regularly. If you need motivation, consider renaming your savings account to the name of your goal, like “vacation.”
Don’t compare yourself to others. This is harder than it seems, especially in the age of social media. We all have access to an endless feed of our friends’ vacations, new purchases and lifestyle upgrades. It can feel like scrolling through constant peer pressure and envy. Instead, remember that everyone’s goals, values and financial situations are different. Pause and ask yourself, “What are MY financial goals? What is it that I really want?” Then, review your budget and come up with a plan to reach those goals.
Get creative with upgrades. When your budget allows for something extra, be selective. Determine your upgrades based on how happy they make you, rather than dollar value. Studies show that spending money on things that buy us time (as opposed to material goods) make us happier. So instead of spending on name-brand shoes, consider paying for meal delivery or a cleaning service.
Conclusion
Being self-aware is the key to countering lifestyle creep. Clear goals, a budget you can stick to and avoiding comparisons with others can help you have even more money in the long run. It’s okay to celebrate and treat yourself to a thing or two—just don’t change your lifestyle with unneeded purchases. Financial responsibility isn’t always fun in the moment, but you can be proud of yourself knowing you made the right choice and have set yourself up for success.